Commonwealth v. Douglass

| Ky. Ct. App. | Dec 16, 1893

CHIEF JUSTICE BENNETT

deiivered the opinion oe ti-ie court.

These proceedings were commenced and prosecuted by the Commonwealth to prevent the usurpation of the franchise claimed by Douglass to operate said lotteries. It seems that the Legislature in 1850 authorized J. N. Webb to raise money by lottery for the benefit of the Henry Academy and Henry Female College.

The third section of the act empowered the grantees to sell the scheme, which they did: and which fell into the hands, by purchase, of the appellant Douglass, who proceeded to operate the same under said grant He claims that the Legislature having authorized the sale of the franchise, and he having become the purchaser thereof, his right to it became a vested right, which the Legislature could not thereafter take away, because it would be impairment of the obligation of contracts which article 1, section 10 of' the Constitution of the United States expressly forbids. The lower court upon the hearing of the case decided that the grant had expired by limitation, and that decision must stand and is affirmed. In 1838 the Legislature granted the privilege to certain gentlemen to raise money by lottery fon the benefit of the city schools of Frankfort, and in 1872 the said act was amended so as to allow the board of councilmen of the city of Frankfort to sell and convey the privileges granted for the purposes mentioned.

And the appellee, in 1875, purchased all the lottery franchises and privileges conferred by the act of 1838, and also, the amendatory act of 1869.

The appellee, Dougiess, contends that he was the purchaser of said franchise and claims that by reason of the act authorizing the sale of said lottery and the purchase thereof, he acquired a vested right which the Legislature could not take away by its act of 1890 repealing said franchise, and relies upon article 1, section 10 of the Federal Constitution, which prohibits the States from passing any laws impairing the obligation of contracts as sustaining his contention and the decisions of this court thus construing his purchase.

This court in the case of Gregory v. The Trustees of the Shelby College Lottery, 2 Met., 598, decided that a lottery grant might be repealed by a subsequent Legislature, unless rights had been acquired and liabilities incurred upon the faith of the privileges conferred by the grant; in which case the rights thus acquired and liabilities incurred become contractual which the provision, supra, protected from repeal by subsequent legislation. The appellant contends that the grant of the lottery privilege by the State was an exercise of its police, nor its contractual, power, which is inherently lodged in the State for the promotion and protection of its welfare and happiness, which the State can not surrender and barter away, either as a gratuity or for pay. That while the Legislature may, in the exercise of its police power, grant a lottery privilege, the grant is only a privilege or license, not contractual, and a subsequent Legislature, in the interest of good order and morals, may revoke the privilege thus granted and repeal the grant, although pecuniary interests have been acquired under and by authority of the grant.

It seems that this court, in the Gregory case, supra, decided expressly that where rights had been acquired and liabilities incurred upon the faith of the lottery grant such rights and liabilities should be regarded as contracts which are protected by the Federal Constitution against impairment by the State Legislature and which should be upheld to the extent, at least, that the party has the right to enjoy the right thus acquired until he realizes his money thus invested out of the lottery business. The famous Dartmouth College case, and others that have followed it, is invoked to sustain this position. The other cases upon the same subject, subsequently rendered by this court, repeat the same doctrine. But the Supreme Court of the United States, in Stone v. Mississippi, 101 Supreme Court Reports, 811, in construing the provision of the Federal Constitution that declares that the States shall pass no laws impairing the obligation of contracts, held that the inhibition related to “property rights” and not to matters that were “governmental.” The court there held, in strong and emphatic language, that lotteries being a species of gambling, were vicious and demoralizing in the communEy, and that as it was the trust duty of the State government to protect and promote the public health and morals it could not sell, barter or give away that duty, and that the utmost power the Legislature could exercise was to grant a license to carry on that species of gambling which only protected the licensee from the pains and penalities imposed upon that species of gambling, during the existence of the license, and that the Legislature granting the license had no power to bind a subsequent Legislature to its line of policy upon these subjects, and that a subsequent Legislature might repeal the grant of the license, although it had been paid for.

It seems to us that this decision, defining the provision of the Federal Constitution as to what subjects are contracts and protected by it, and that lottery grants, although paid for, are not protected by said provision, is binding ujion this court and has the effect to overrule its decisions holding the contrary view. '

But apart from the binding force of the decision, it seems that its logic is conclusive and convincing in drawing the distinción between the contractual and governmental power of the States, to wit: That the provision of the Federal Constitution in reference to contracts only inhibits the States from passing laws impairing the obligation of such contracts as relate to propery rights, but not to subjects that are purely governmental. The reason for this distinction must be apparent to all, for, when we consider that honesty, morality, religion and education are the main pillars of the State, and for the protection and promotion of which government was instituted among men, it at once strikes the mind that the government, through its agents, can not throw off these trust duties by selling, bartering or giving them away. The preservation of of the trust is essential to the happiness and welfare of the beneficiaries, which the trustees have no power to sell or give away. If it be conceded that the State can give, sell and barter any one of them, it follows that it can thus surrender its control of all and convert the State into dens of bawdy houses, gambling shops, and other places of vice and demoralization, provided the grantees paid for the privileges, and thus deprive the State of its power to repeal the grants and all control of the subjects as far as the grantees are concerned, and the trust duty of protecting and fostering the honesty, health, morals and good order of the State would be cast to the winds, and vice and crime would' triumph in their stead. Now it seems to us that the essential principles of self-preservation forbid that the Commonwealth should possess a power so revolting, because destructive of the main pillars of government.

The power of the State to grant a license to carry on any species of gambling, with the privilege of revoking the same at any time, has an unwholesome effect upon the community and tends to mahe honest men revolt at the injustice of punishing others for engaging in like vices. We have, for instance, at this day men confined in the State penitentiary for setting up and carrying on gambling shops whose tendencies are not much more demoralizing, if any, than the licensed lottery operator, who goes free under the protection of the law. The one wears a felon’s garb and the other is protected by license, which he claims as an irrevocable contract because he has paid for the privilege. The privilege ought never to be granted, and under the present constitution can never be. As said, to impress the privilege with the idea of contract because it was paid for might fill the whole State, and especially the cities, with gambling shops and enterprises, protected by contract, and the few gamblers that might not be thus protected and who would be liable to be punished for gambling, would not be, because it would strike the honest man as unjust to punish‘the poor wretch for doing that which was made lawful for others to do by paying for the privilege. As said, we are bound by the construction given to the provision of the Federal Constitution by the Supreme Court relating to the impairment of contracts by the States to the effect that the provision does not relate to lottery franchises, though paid for, and that the matter of such grants being strictly within the police power of the State, the State could not sell or barter away its control of the subject.

It is contended that the subject of the appellees’ contract right is res ad judicata by this court. It is sufficient to say that the State had no constitutional right to contract its police power away, consequently the appellee made his purchase of the franchise subject to the right of the State to repeal it, and the decision of this court that the appellees’ purchase of the franchise by the authority of the Legislature created a contract that could not, under the Federal Constitution, be revoked, having been virtually overruled by the Supreme Court of the United States destroys the contention of res adjudicata, and while the judge of the court below was loyal to this court in following the opinions heretofore rendered, we must affirm the judgment in the Henry county lottery case, and reverse his judgment as to the Frankfort lottery and remand the case for further proceedings in conformity with this opinion.